tv Your Business MSNBC January 20, 2013 4:30am-5:00am PST
. an upscale auto repair company wants to expand but has to get its financials tuned up first. separating facts from wishful thinking when starting up a small business. an elevator pitch with an inaugural presidential product. it's time to make money coming up next on "your business." small businesses are revitalizing the economy and
american express open is here to help. that's why we are proud to present "your business" on msnbc. ♪ hi there, everyone. i'm j.j. ramberg. welcome to "your business," the show dedicated to giving you tips and advice to help your small business grow. over the past seven years of this show, i've been surprised to see how many small business owners i've interviewed. both successful and not, who have no grasp of their finances. they have a general sense of what's going on, but if you dig a little deeper, it's clear that they've not spent much time with the numbers. and that is exactly how it was for a pair of sports car-loving shop owners, that is, until they discovered they were sitting on a potential gold mine. ♪
after more than 30 years doing auto repair in phoenix, arizona, brothers joe and pat ritz weren't looking to change their business model. that is, until one customer, chris myers, asked what seemed like a very odd question. >> i looked around, sure enough there's a million dollar ferrari sitting out there, right next to a 2010 camry. i'm like that's kind of interesting. i talked to pat and i said, well you charge more for the ferrari, right? >> when pat told him they charged the same hourly rate for any customer, chris said he was surprised because there's such a great difference in skill level needed to work on the two kinds of cars. >> it's not the type of problem that says oh, my god i'm going out of business tomorrow but it's a problem. >> he loves finding overlooked opportunities hidden inside accounting numbers. >> we have people who are tracking the wrong numbers in their business. maybe they're looking at what type of word of mouth feedback
you receive, when in reality, they should be looking at is return of purchases. >> chris is a self-described numbers geek. he offered his program to help the ritz brothers understand which numbers have the greatest impact on the value of the company. >> what they saw was they were not utilizing their assets properly and their assets being, of course, past time as a master craftsmen. >> we were used to getting our hands dirty and done at any level we were missing the point of what best served our clients a and company. >> their company is called sports and collector car center. until chris spoke up they had very little interest in tracking their financials. >> we used to be, you know, you wait by the mailman to bring the bank statement and see if you were still in business. >> today, things are different. joe and pat aren't waiting around for the mailman to understand their business. >> 7498, joe. >> a real estate agent is showing them around a huge new
location. >> there's nothing like it anywhere that i'm aware of. >> i'm just thinking like we put the row of racks and then make an aisle. >> what happened? these two had found a whole new vision of the company buried in their own account books. >> we could see day to day where we were at and what we were doing. it puts excitement into the business. >> by monitoring the day-to-day financials they discovered that if they could get customers to pay on time and cut some of their extra costs, it would make a big difference. >> they found out a way to collect their receivables more efficiently, they tightened up spending on a few issues and they increased their value of the business by something like 15%. >> i have no financial background so now i'm reading these things and going wow, this is pretty great. >> the more they looked, the more they found. and then they struck strategy pay dirt when chris asked about the big number of customers backed up at the front desk. >> they must be busy today. i should probably come back another time. i said that to joe. he said no, these guys are just
here to hang out. >> he said, i hope those guys spend a lot of money here because they waste a lot of your time. i said i wouldn't have it any other way, and i don't consider it a waste of time. >> they will migrate back here to see what's going on. they like cars. >> it struck me like a ton of bricks. you're not an auto shop people like to hang out at. you're a hangout that's an auto shop. >> does that have a air cleaner? >> chris realized the garage was more than a repair shop. it had become a community of car collectors that liked to hang out together. >> i wanted to cultivate a community more so than just a garage. >> together, they hatched a new business plan, to create a kind of car collector clubhouse with its own auto maintenance facility. >> you can come socialize with people who have cars. it will be car oriented like a clubhouse, like a country club, where you come in and you can have a drink, you can have your car worked on.
it will be a membership type facility. >> with this daring new plan in mind, they used the software to run the numbers and assess the risk of giving the business a total make-over. >> what if we price that a little bit closer to where the market pricing is, then you can step out and say wow, that's an entirely new ball game, new business. >> now i'm seeing a direction and road map that can take us to that goal that used to be just a vision. >> i think they opened their eyes a little bit and said there's so much out there that we could be doing that wouldn't require much effort really, but could tremendously improve the cash flow and value of the business. >> like we had talked about, right now, your current office is 80% shop and 20% social. and what we're doing here is going 80% social and 20% shop. >> the flip. >> exactly. exactly. >> it is a new dream. it's at a level that i always wanted to be at, but never had any idea how to get there.
>> clearly as we just saw in that story, paying attention to your financials is important on so many levels. let's talk a bit more about this with our guests. doug is the president of clarity consulting and author of the book "taking smart risks, how sharp leaders win when stakes are high" alexa is the founder and ceo of learn vest.com leading personal finance and lifestyle website for women and monica is a managing partner at seventh capital and author of the book "the entrepreneurial instinct how everyone has the innate ability to start a great small business." great to see all of you. >> great to be here. >> i am shocked at how many people i've said this before, you get to their business and it's pretty successful and they have no idea what's going on in terms of money. >> yeah. >> what's the first step these people should take? >> what i loved about this story, they took the time to look at the data. they had a great customer that came in and gave them some insights which is great, but they took the time. so many businesses, there's data
everywhere, there's great insights about what customers are good, high profit, low profit, because you're a small business just trying to make money and work hard, every dollar looks like a dollar i need to have and you don't stop and say, which of these dollars aren't smart to pursue. which ones are. it really only takes a couple hours often times to understand that. >> how do you start? one of the things i talked about in the piece was looking at the wrong metrics. how do you decide what are the right metrics and wrong metrics? >> the most important metric for them to look at, why i think they're shifting is time. they have limited time in their auto repair shop. focus on the highest margins which fixing normal cars, everyday cars, has a lot less margin than fixing collector cars. and i think that was probably the most important metric for them to look at, was margins against the time they had and utilization. i think that was a powerful switch for them and going to pay off. >> do you suggest, monica, one of the issues is a lot of people are scared of numbers, right. they look at all of these numbers, all this data and they
shut down. for someone like that, what do you suggest? hire someone to help you? just suck it up and sit down and look at it yourself? >> it's very much important to look at these numbers at periodic moments in your business. most people don't bother to do it unless it's time to go raise financing and i think what the story really explains is that the praydo principle applies to most businesses, whether a car shop or apirl company. you're going to make 80 % of profit in revenue from 20% of your skews. the software is fantastic because it guides you through and provides a framework, even if you are scared of numbers you've got this kind of can't go wrong, step one two three way to process all of the financial day date ta. >> eric, came on the other day, and he said something really interesting. we were talking about metrics, people often look at the wrong metrics. the example he gave was, you are converting 50% of your customers
and what you want to do is increase conversion. then you do a big marketing campaign and instead of 100 people coming in you get 200 people coming in, but you only sold 100 things. you still only have 50% conversion but if you look at the raw numbers you think wow, i did great in my sales and so even if you're looking at all of this data, how do you catch yourself to say, you know, make sure you're still looking at the right things? >> yeah. i think that the -- the trick is to really spend time with your customers, to understand what your customers are -- what they're willing to pay for, what the best way that you can kind of create value for them and so it may be that we're building customer base and we're spending a lot of money to get the customers but we see the long tail on those customers as being really important. that's valuable. sometimes we may say those customers aren't going to be around long, that's not valua e valuable. one thing i would say, often times you want to hire a financial expert to stop and say
here's a way to model the business not just for the six months but the next year or two years to help where you make the longer term decisions. it's very important. >> i was going to add to that, it's important to hire someone if you're not sure what to look at but it's critical you understand it. you can't sort of understand it. you need to get into the weeds and understand what's driving your business. i think, you know, for one of the things here then, is also you have to test your hypotheses. one thing that scares me about this idea they're shifting from 80% being an auto repair shop and 20% a hangout and they have some concept people like to spend there but they're going to shift it to being an 80% hangout. how do they know people will want to spend $10,000 hp look at the numbers and test your hypotheses, test, feedback, focus groups, whatever it may be. that's a big risk to take without having data. >> i think the upshot of this discussion and that story, if you're one of the people waiting for the mailman to come to see if you have enough money to stay in business the next month, take some time out and dig into those
numbers. thanks a lot. looking to earn true customer loyalty? the kind that translates into recommendations, referrals and overall a better bottom line? here are five ways to help customers find the love courtesy of bisbest.com. one, end of the obstacle course. make sure your clients know how to reach you if they need help. send out e-mails periodically to check in. two, avoid customer hot potato. whenever possible, the person who speaks to a customer first should stay with that customer for the duration of their visit. passing them off to someone else can make the shopper feel like they weren't important enough for your undivided attention. number three, streamline your website. keep it simple. figure out one look and message you want to send and stick with it. four, invest in customer loyalty. offer something without them having to ask or pay extra for
it. and number five, offer customers real choices. don't bind them into the fakes choice of letting them opt out of something. let them know up front that they can decide to get e-mails and offers from you and give them a choice. >> we say it all of the time here on this show, a good idea does not always lead to a good business. so, how do you evaluate if your idea has the potential to actually make money? steve blank is a retired entrepreneurial and lecturer at stanford university and author of the book "the start-up owner's manual, the step-by-step guide for building a great company." great to see you, steve. >> glad to be here. thanks very much. >> okay. so you are starting a business or you have an idea. what's the first thing you need to do to decide, okay, this is a viable idea or not. >> the first thing you need to do is realize all your passion and energy has made you start on day one of faith-based enterprise. even though you think it's a rationale business, on day one,
all you have is your passion. and your job is to turn that faith, that is your assumptions, about everything you think you would believe about customers and markets and pricing into facts and we kind of now say there are no facts inside your building or office, so get the heck outside. and the whole idea is, we believe you need to get outside your office and test some of your key assumptions about your business. >> yeah. i always talk about this. don't get tunnel vision. you and your husband or wife or your senior managers or co-founder, you have one idea. you don't know if that's going to really fly when you get out your doors. what problem you're solving. that's a great way to frame what you're doing. >> right. so most start-ups are either solving problems or solving -- or fulfilling needs. and so while you will have a strong belief about yes, of course, people have this problem, or they have this need, then it should be really easy to go out and talk to people and
see if they believe that. and almost all the time you get surprised and go, oops, i was the only one who believed that people would actually pay to solve that problem. >> you talk about finding out who cares. how do you figure that out? >> you know, when you start a company, you have a series of assumptions. hypotheses about these are going to be my customers, this is what they look like, this is where they live, and, you know, that's kind of your customer segment. you get out of your office and building and start calling them and meeting them and you start doing what i call you watch their pupils die late as you actually describe or demo your product or service. and if you're right, they'll grab it out of your hands and if you're wrong, they'll say well, you know, not particularly interested. boy, that's a great time to find that out is before you invest tons of time and money in your start-up based on faulty assumptions. >> you get to the point where you've figured out what problem you're solving, who cares about it. here's the key, is someone
willing to pay you enough so that it makes a viable business and how do you figure out what you can charge for this? >> you know, one of the things we usually believe as founders is, of course people are going to value this at whatever price i just said. and you set a price and you're usually surprised you don't get enough sales or people think it's too expensive or worse is you leave a lot of money on the table. the nice part is today you can actually use the internet and direct sales techniques to kind of do ab testing, that is, test different prices, test different categories, test different revenue models. do i do a subscription, is it a direct sale, something fremum, give a base product away and have people upgrade. i could run a series of scientific experiments about what's the right pricing. >> when you talk about how you know what someone would pay you're going out and doing a real test and seeing them open up their pocketbooks and seeing how much they'll pay?
>> you bet. >> the start-up owners manual for anyone out there who has an idea and thinking about turning it into a business. steve, thanks, we appreciate it. >> thank you, j.j. >> when we come back, we answer your small business questions including how to transition your networking skills from off-line to on-line. and what time is it? it's time for another presidential inauguration and today's elevator pitcher says he has products worth watching. we've all had those moments. when you lost the thing you can't believe you lost. when what you just bought, just broke. or when you have a little trouble a long way from home... as an american express cardmember you can expect some help. but what you might not expect,
is you can get all this with a prepaid card. spends like cash. feels like membership. an essential part of making the game work is providing methods of progress and also rewards to consumers for a job well done. the most common game of rewards system is called the badge. it can be an item, virtual on someone's facebook profile or real world that gives them a reward for a job well done. customers being the 1,000th person into your store or an employee coming in to work on time five days in a row. using badges and rewards together as part of a strategy you're well on your way to creating unprecedented engagement to consumers and employees and getting your business into the game. >> in the last few weeks we've
been talking about how companies are using it to increase their user base. we've learned a lot ourselves about the process and why we've tried to incorporate gamefication at your business. we asked you to send your entry for our most creative logo, and after serious deliberation, drum roll please, the winner is von cochran of jacksonville, florida, sent us his logo from his company black fly. he says the logo represents a lifestyle brand that combines fly fishing, art and adventure travel rolled into one. he wins a copy of our book "it's your business" a coveted "your business" coffee mug and i will call him to talk about how to tackle some of his company's challenges. congratulations. president obama will be inaugurated for his second term this week which means time is running out for today's elevator pitcher to capitalize on the event with his commemorative watches.
>> hi. i'm jack goldenburg, president obama watches. >> nice to meet you. >> since 2008 we've sold 30 obama watches. it's not that hard because president obama is the political rock star of the free world. we've had watches like yes, we can, serious like "yes we can" and the biggest one is brot be rack around the clock." i came up with the idea around 2008 when i wore one obama watch to a party and wasn't planning to wear any more and the next day people called and asked where to get the watches. let me show you. this is the new inaugural watch. okay? >> cool. >> i brought you each a watch. this is the "yes we can" watch and i have something for all the kids. >> i need the "time to pay taxes" watch. >> okay we can't find the other watch but it's here some place. i need about $1 million in financing. that world work on this new watch. this is called a "flip" watch. two watches in one. people don't buy watch anymore
just to tell the time. they buy watches to tell something about themselves. so this watch you could be -- in this case it's an obama inaugural watch. one watch here and one watch there. >> i'm going to stop you so you get the million dollars. what do you need it for? >> licensing and cash flow. >> got it. okay. you guys, you have a watch. i wonder if this will influence monica's decision. i suspect not. how do you think -- into job. right? how do you think you did, monica? >> i think that his pitch was great. i think you have a catchy product that's fun but for a million dollars i would be looking for a company that has the opportunity to scale so i'd really want to know how you're going to grow this business post his second term, because there may be a big slipdown in terms of people's interest in showing their obama support. >> you clearly have a lot of passion. my question would be for a million dollars, anyone that is going to invers wants to know how big the market opportunity is and i have questions about if
it's just obama what will happen after four years but particularly you want to see -- how big the this business really be? >> fair enough. >> would you take another meeting, alexa some. >> absolutely. >> monica? >> she said yes. >> all right. good luck with everything. thanks for coming on the program. >> my pleasure. >> and if any of you out there have a product or a service and you want feedback from our elevator pitch panel on your chanceness of getting interested investors, all you have to do is send us an e-mail, your business at msnbc.com. in that e-mail include a short summary of what your company does, how much you're trying to raise and what you intend to do with that money. you never know, if somebody out there watching the show may be interested in helping you. time to answer some of your business questions. alexa and monica are what us once ben. the first question is about changing the way you market your company. >> i do well with in-person, face-to-face networking to grow my business.
how i do translate those skills online to reach mother clients and grow. business? >> this is interesting because oftentimes i hear opposite. i'm great at online be i never meet people face-to-face. it seems that she has a personality that the translate on line. >> if you're good at face-to-face communication because you'll be fantastic online. that makes it much easier to reach lots of people quickly so you open lots of doors. but what the face-to-face networker do is make those interactions relevant. she can correct and that's how to convert the contact. >> this is what social media is literally all about. taking a vibrant personality offline and contextualizing that online. so take an online social media class and get up to speed on twitter, facebook, instagram, et cetera and get out there and have real conversations online. that's exactly what social media is made for.
>> and by the way, maybe she tested it out with someone that she already had a good relationship with and think about it as talking to that exact person. but it's going out to a larger audience. let's move on to the next one. this is about whether or not a business needs a personal touch. >> in this day of high-tech conat the present time, apps, blogs, webinars and other e-based communications, how important is one-on-one contact with your clients and how does the panel feel about that being a thing of the past? >> we put these together, obviously, because they are asking the exact opposite thing. what do you think? it's -- it's much more cost and time efficient to talk to people over social media than to actually meet them is this. >> i would say i don't think that we're ever going to lose a business that needs to have, one-on-one contact. customer service is everything. talking to your customers is particularly, the number one source of innovation and ideas.
customers tell you what they want you to change and give you feedback, praise, love and what's critical is to listen. that's where product information come and products have amazing customer support and companies that really thrive. it will never go away. it is 23u7bdmentally critical and any good product manager knows that. >> it depends on the type of business you run. if you're an e-book retailer one-on-one may not be as important. but i saw capital management in his byline soy think people want to talk to their money adviser. >> and a question about growing your brand. >> if you are the business and the business is just one person, how do you build up a brand that totally encompasses what it is that you do? >> what do you do? >> transsending the one-person brand to a recognizable entity, something bigger, really is about trying to find something organic. and something that is about a lifestyle or about a pricing, a
way to look at pricing or a way to look at quality and it's kind of what ralph lauren does well. he started out making ties and he was known for making quality ties but over time he turned it into this lifestyle and it's taking that abstract concept and applying it to your identity. >> so i think what's really important about that, first i'll say lots of great brands get built around people. but what's critical is you have to be the expert. if you're going to be a decorator you have to be the expert and have a reason why you have authority. if it's personal finance you have to go out and get your cfp and be an expert. that's really important. that authority concept. once you have the authority you can encompass a lot of things as long as you have that and people trust you. the second thing, building a personal band is all about trust. you really have to talk to your user base, to your customers and let you know you're there and it needs to be built in a genuine capacity.
people see through a lot of the disingenuousness and it turns into you not being able to build a brand so you got to be again genuine and you got to be an expert. >> if any of you out there have a question for our experts just go to our website. the address is open forum.com/your business. once you got there, hit the "ask a show" link. open forum.com/your business. if you'd rather send us an e-mail at your busines business @msnbc.com. >> and keeping up with the latest trends, let's check in on twitter to see what hot topics entrepreneurs are talking about. a fast company has a interesting fa factoid. your business panelist and marketing man, dave scott says, the realtime web means you no
longer have the luxury of relying solely upon preplanned marketing and pr campaigns. and the always-insightful guy kawasaki with great advice. he resolves to say these words more often in 2013, "i don't know. what do you think?" if you're anything like they, you're probably not that good at organizing your receipts and expensing them. chances are your staff may not be that great at it either so check out our app of the week. expenseify helping you track and your smartphone or tablet. upload photos of your receipts, file expense reports and log your mileage using the free app. to learn more about today's show, just click on our website. it's open forum.com/your business. you'll find all of today's segments plus web exclusive content with for information to help your business grow and you can follow us on twitter. it's @msnbc your